Multiple Choice
Which of the following can be considered cost objects in managerial accounting?
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1. Introduction to Accounting
Types of Accounting
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A _____ is a short-term investment that is considered highly liquid.
A
accounts receivable
B
long-term asset
C
cash equivalent
D
inventory
Verified step by step guidance1
Understand the concept of 'cash equivalent': A cash equivalent is a short-term investment that is highly liquid and can be quickly converted into cash with minimal risk of loss in value.
Review the characteristics of cash equivalents: They typically have a maturity period of three months or less, are readily convertible to a known amount of cash, and are subject to an insignificant risk of changes in value.
Compare the given options: Accounts receivable, long-term assets, and inventory are not considered cash equivalents because they are either not liquid or not short-term investments.
Identify the correct answer: Cash equivalents meet the criteria of being highly liquid and short-term investments, making them the correct choice in this context.
Apply this understanding to similar problems: When identifying cash equivalents, focus on their liquidity, short-term nature, and minimal risk of value fluctuation.
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